The government will no longer sell its savings bonds that provided returns at 7.75 per cent (on a taxable basis), it said in a notification on Wednesday.
“The Government of India … hereby announces that the 7.75 per cent Savings (Taxable) Bonds, 2018, shall cease for subscription with effect from the close of banking business on Thursday, May 28, 2020,” the Reserve Bank of India (RBI) said in a notification on its website.
State Bank of India, nationalised banks, Axis Bank, ICICI Bank, HDFC Bank, and Stock Holding Corporation of India (SHCIL) were entities issuing these bonds.
The government notified that it was stopping only fresh issuance of the popular retail bonds.
The entire interest rate structure is coming down, amid the slowdown. Small savings rates have reduced to 7.1 per cent, while banks are offering just 5-6 per cent on deposits.
The RBI is reducing the repo rate and banks are reducing deposit rates.
The now discontinued 7.75% retail bonds were available for seven years. Since these were not traded in the secondary market, redemption took place at maturity. Premature withdrawal was allowed only for senior citizens, though there was a lock-in period.